Morgan Stanley sues NTL for ?7m

NTL, the debt-laden cable company, is being sued by Morgan Stanley, one of its closest banking advisers, for more than £7m in unpaid fees.

The US investment bank is pursuing the British firm for payment for work dating back to 1999.

The litigation is a surprise because Morgan Stanley has been one of NTL's longest standing advisers and is still working on the cable firm's $10.6bn (£6.6bn) rescue from Chapter 11 bankruptcy protection. The bank stands to generate millions of pounds in fees from that work.

NTL was forced to seek bankruptcy protection after admitting it would soon be unable to pay debts it had racked up building its network of cables across Britain. It had been due to emerge from Chapter 11 by the end of November but the complexity of the restructuring, which involves 60 European banks, has delayed that move.

People close to the negotiations insist the transaction is still on track for completion, which could come "any day now". NTL said that it believed it had grounds to object to the claims made by Morgan Stanley but was still deciding whether to contest the suit.

Details of the litigation emerged from a filing made by NTL at Companies House. The document also revealed that a new $500m loan facility which NTL needs to continue trading is likely to be secured at a lower rate of interest than first expected.

At 19%, the interest rate is higher than those for most loans but reflects the difficulties the company has faced. NTL sources say they had originally expected the loan to be secured at a rate of 20-24%.

The filing's other revelation is that Duncan Lewis, the cable expert who was due to become a director of the new NTL, has already vacated his position.

Investors expect NTL to seek a merger with rival Telewest once both companies have stabilised their finances. Telewest is eager to seal a transaction quickly but NTL is playing down talk of a speedy deal.